NOTE 9 – SHARE-BASED COMPENSATION

In March 2016 shareholders approved a new equity incentive compensation plan (“the Plan”), under which incentive stock options, non-qualified stock options, stock grants, stock-based awards, restricted stock, restricted stock units, stock appreciation rights, performance units, performance stock, and other stock or cash awards may be granted. Shares to be issued under the Plan may be authorized and unissued shares, issued shares that have been reacquired by the Company (in the open-market or in private transactions), shares that are being held in the treasury, or a combination thereof. The maximum number of shares of common stock approved that may be issued under the Plan is four million shares. Awards may be granted to officers, employees, directors, consultants, advisors, and independent contractors of the Company or its subsidiaries. In the event of a change in control (as defined in the Plan), the vesting of awards may be accelerated. The Plan, aspects of which are more fully described below, prohibits further awards from being issued under prior plans. The Company incurred total share-based compensation expenses of $3.8 million, $3.7 million, and $4.1 million in fiscal years 2016, 2015, and 2014, respectively. No share-based compensation cost was capitalized as part of an asset and no related income tax benefits were recorded during the fiscal years presented.

Stock Options

Option awards generally vest in one to four years, and have a ten year contractual term. All incentive and non-qualified stock option grants must have an exercise price no less than the market value of the underlying common stock on the date of grant. The grant date fair values of options are based on the closing price of the Company’s common stock on the date of grant using the Black-Scholes option pricing model. Expected volatility is based on the historical volatility of the Company's stock. The Company uses historical option exercise behavior and employee termination data to estimate expected term, which represents the period of time that the options granted are expected to remain outstanding. The risk-free rate of return for the estimated term of the option is based on the U.S. Treasury yield curve in effect at the date of grant.

The weighted-average inputs and risk-free rate of return ranges used to calculate the grant date fair values of stock options issued during fiscal years 2016, 2015 and 2014 are presented in the following table:

	Year Ended
	October 30, 2016			November 1, 2015			November 2, 2014

Expected volatility		48.4	%		53.7	%		61.0	%

Risk-free rate of return		1.2 – 1.7	%		1.3 – 1.6	%		1.4	%

Dividend yield		0.0	%		0.0	%		0.0	%

Expected term	5.1 years			4.7 years			4.6 years

The table below presents a summary of stock options activity during fiscal year 2016 and information on stock options outstanding at October 30, 2016.

Options	Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life		Aggregate Intrinsic Value

Outstanding at November 1, 2015		3,803,168		$	7.29
Granted		667,250			11.83
Exercised		(572,033	)		5.37
Cancelled and forfeited		(363,050	)		15.68
Outstanding at October 30, 2016		3,535,335		$	7.59	6.4 years	$	9,413
Exercisable at October 30, 2016		1,973,635		$	5.93	4.8 years	$	7,837
Vested and expected to vest as of October 30, 2016		3,438,261		$	7.53	6.3 years	$	9,309

The weighted-average grant date fair value of options granted during fiscal years 2016, 2015 and 2014 were $4.51, $3.81and $4.44, respectively. The total intrinsic value of options exercised during fiscal years 2016, 2015 and 2014 was $3.5 million, $2.0 million and $1.4 million, respectively.

The Company received cash from option exercises of $3.1 million, $2.2 million and $1.1 million in fiscal years 2016, 2015 and 2014, respectively. As of October 30, 2016, the total unrecognized compensation cost of unvested option awards was approximately $4.3 million. That cost is expected to be recognized over a weighted-average amortization period of 2.5 years.

Restricted Stock

The Company periodically grants restricted stock awards. The restrictions on these awards typically lapse over a service period of one to four years. The fair value of restricted stock is determined and fixed on the grant date based on the company’s stock price. The weighted-average grant date fair values of restricted stock awards issued during fiscal years 2016, 2015 and 2014 were $12.13, $8.28 and $8.86, respectively. The total fair value of awards for which restrictions lapsed was $1.7 million, $1.4 million and $1.5 million during fiscal years 2016, 2015 and 2014, respectively. As of October 30, 2016, the total compensation cost for restricted stock awards not yet recognized was approximately $1.0 million. That cost is expected to be recognized over a weighted-average amortization period of 2.2 years.

A summary of restricted stock award activity during fiscal year 2016 and the status of the Company's outstanding restricted stock awards as of October 30, 2016, is presented below:

Restricted Stock	Shares			Weighted-Average Fair Value at Grant Date

Outstanding at November 1, 2015		189,588		$	7.34
Granted		115,225			12.13
Vested		(142,438	)		8.62
Cancelled		-			-
Outstanding at October 30, 2016		162,375		$	9.61
Vested and expected to vest as of October 30, 2016		154,245		$	9.64

Employee Stock Purchase Plan

The Company's Employee Stock Purchase Plan ("ESPP") permits employees to purchase shares at 85% of the lower of the closing market price at the commencement or ending date of the Plan year (approximately one year). The Company recognizes the ESPP expense during that same period. As of October 30, 2016, the maximum number of shares of common stock approved by the Company's shareholders to be purchased under the ESPP was 1.5 million shares. Under the ESPP, approximately 1.3 million shares had been issued through October 30, 2016, and approximately 67,000 shares are subject to outstanding subscriptions. As of October 30, 2016, the total compensation cost related to the ESPP not yet recognized was $0.1 million, which is expected to be recognized in fiscal 2017.